2600 Federal Register / Vol. 78, No. 8 / Friday, January 11, 2013 / Proposed Rules 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Part 69 

[WC Docket No. 05–25; RM–10593; FCC 12– 

153] 

Special Access for Price Cap Local 

Exchange Carriers; AT&T Corporation 

Petition for Rulemaking To Reform 

Regulation of Incumbent Local 

Exchange Carrier Rates for Interstate 

Special Access Services 

AGENCY: Federal Communications 

Commission. 

ACTION: Proposed rule. 

SUMMARY: In this document, the 

Commission seeks comment on: A 

market analysis that the Commission 

intends to undertake in the coming 

months to assist in evaluating 

competition in the market for special 

access services; possible changes to the 

Commission’s pricing flexibility rules 

after the Commission conducts its 

market analysis; and the reasonableness 

of terms and conditions offered by 

incumbent LECs in the special access 

market. 

DATES: Comments for sections IV.A and 

IV.C are due on or before February 11, 

2013. Reply comments for sections IV.A 

and IV.C are due on or before March 12, 

2013. Comments for section IV.B are 

due on or before August 19, 2013. Reply 

comments for section IV.B are due on or 

before September 30, 2013. 

FOR FURTHER INFORMATION CONTACT: 

Jamie Susskind, Wireline Competition 

Bureau, Pricing Policy Division, (202) 

418–1520 or (202) 418–0484 (TTY), or 

via email at Jamie.Susskind@fcc.gov. 

SUPPLEMENTARY INFORMATION: This is a 

summary of the Commission’s Further 

Notice of Proposed Rulemaking 

(FNPRM) in WC Docket No. 05–25, RM– 

10593, FCC 12–153, adopted on 

December 11, 2012, and released on 

December 18, 2012. This summary 

should be read with its companion 

document, the Report and Order 

summary published elsewhere in this 

issue of the Federal Register. The 

summary is based on the public 

redacted version of the document, the 

full text of which is available 

electronically via the Electronic 

Comment Filing System at http:// 

fjallfoss.fcc.gov/ecfs/ or may be 

downloaded at http://hraunfoss.fcc.gov/ 

edocs_public/attachmatch/FCC-12- 

153A1.pdf. The full text of this 

document is also available for public 

inspection during regular business 

hours in the Commission’s Reference 

Center, 445 12th Street SW., Room CY– 

A257, Washington, DC 20554. The 

complete text may be purchased from 

Best Copy and Printing, Inc., 445 12th 

Street SW., Room CY–B402, 

Washington, DC 20554. To request 

alternate formats for persons with 

disabilities (e.g. Braille, large print, 

electronic files, audio format, etc.) or 

reasonable accommodations for filing 

comments (e.g. accessible format 

documents, sign language interpreters, 

CARTS, etc.), send an email to 

fcc504@fcc.gov or call the Commission’s 

Consumer and Governmental Affairs 

Bureau at (202) 418–0530 (voice) or 

(202) 418–0432 (TTY). 

I. Further Notice of Proposed 

Rulemaking 

1. We now commence a process to 

more effectively determine where relief 

from special access regulation is 

appropriate and otherwise update our 

special access rules to ensure that they 

reflect the state of competition today 

and promote competition, investment, 

and access to services used by 

businesses across the country. In 

Section I.A, below, we propose and seek 

comment on a market analysis that we 

intend to undertake in the coming 

months to assist the Commission in 

evaluating whether the pricing 

flexibility rules result in just and 

reasonable special access rates and what 

regulatory changes may be needed. We 

anticipate that the analysis will be a 

one-time assessment of the competitive 

conditions in the special access market; 

however, we do not foreclose the 

possibility that further analyses may be 

needed in the future. 

2. Our proposed market analysis is 

only one step in our process. Once the 

data are collected and analyzed, we may 

modify the existing pricing flexibility 

rules or adopt a new set of rules that 

will apply to requests for special access 

pricing flexibility. In section I.B below, 

we seek comment on how the special 

access pricing flexibility rules might 

change after we conduct our market 

analysis. We also seek comment on 

what steps the Commission should take 

where relief has been provided under 

our existing rules and where the data 

and our analysis demonstrate that 

competition is not sufficient to 

discipline the marketplace. Finally, we 

seek in section I.C data and information 

on the terms and conditions offered by 

incumbent LECs for special access 

services to facilitate our understanding 

of competition in the special access 

market and our ability to craft rules that 

properly address the state of the 

marketplace. 

A. Approach To Analyzing Special 

Access 

1. Background 

3. In the Analytical Framework Public 

Notice, the Bureau sought comment on 

a methodology that could be employed 

to evaluate the efficacy of the special 

access regulatory regime. The Bureau 

requested that parties propose an 

analytic framework capable of assessing 

whether the Commission’s price cap 

and pricing flexibility rules ensure just 

and reasonable rates, as well as just and 

reasonable terms and conditions in 

special access tariffs and contracts. The 

Bureau noted that once the Commission 

adopted 

an analytical approach enabling a systematic 

determination of whether or not the current 

regulation of special access services is 

ensuring rates, terms, and conditions that are 

just and reasonable as required by the Act, 

[the Commission] c[ould] determine what, if 

any, specific problems there are with the 

current regime and formulate specific 

solutions as necessary. 

4. The Bureau subsequently held a 

staff workshop to gather further input 

on the analytic framework proposals 

raised in the record and any associated 

data collection that would be required 

to implement such proposals. In 

response to the Analytical Framework 

Public Notice, as well as through the 

staff workshop, commenters set forth 

several proposals for an analytic 

framework that the Commission could 

implement to evaluate the current 

special access rules. 

2. Proposals in the Record 

5. Several parties recommend that the 

Commission adopt a market power 

analytic framework in lieu of the Pricing 

Flexibility Order’s competitive showing 

rules. In the past, the Commission has 

defined market power as the power to 

control price. The U.S. antitrust 

agencies have also expanded their 

definition of market power to include 

the ability to ‘‘reduce output, diminish 

innovation, or otherwise harm 

customers as a result of diminished 

competitive constraints or incentives.’’ 

A market power analysis commonly 

evaluates separately ‘‘competition for 

distinct services, for example 

differentiating among the various retail 

services purchased by residential and 

small, medium, and large business 

customers, and the various wholesale 

services purchased by other carriers’’ in 

a distinct geographic area. A market 

power analysis also typically involves 

the consideration of providers’ market 

shares, supply and demand elasticity, 

and carriers’ cost structures, size, and 

access to resources. 

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6. Commenters voicing support for 

adoption of a market power framework 

state that it will ensure that, going 

forward, the Commission’s evaluation of 

competition for special access is a 

comprehensive, economically sound, 

and data-driven means of understanding 

where and what kinds of regulatory 

relief are justified. Other commenters 

raise concerns about a market power 

framework, stating, for example, that the 

questions at the heart of a traditional 

market power analysis used in 

transaction review, such as how to 

define markets or analyze demand and 

supply responsiveness, have been made 

irrelevant by competition; that such an 

approach is not an administratively 

workable way to address individual 

petitions for pricing flexibility; that it is 

impractical to determine whether a firm 

has market power where baseline prices 

are regulated; and that a market power 

framework is inconsistent with the 

Commission’s goals for the deregulation 

of telecommunications services. 

7. Another analytic framework 

proposed in the record involves 

comparing actual purchase prices for 

special access to specific benchmarks, 

such as rates for reasonably similar 

services (e.g., rates for UNEs, retail 

broadband services such as DSL or cable 

modem service, or rates in price cap 

areas as compared to pricing flexibility 

areas), the costs associated with 

providing special access services (e.g., 

forward-looking costs), or rate-of-return 

estimates (e.g., ARMIS rates-of-return). 

Commenters assert that where special 

access prices are higher than such 

benchmarks, the Commission should 

find that the competitive showings 

adopted in the Pricing Flexibility Order 

are insufficient to ensure just and 

reasonable rates. Incumbent LECs, on 

the other hand, assert that the proposed 

benchmarks are neither necessary— 

because special access rates have 

already been ‘‘set’’ by the competitive 

marketplace—nor do they provide a 

reasonable proxy for special access 

rates. Such carriers do, however, state 

that the Commission may be better 

positioned to develop its own cost 

benchmark after collecting data on 

special access prices and the presence of 

competition in specific geographic 

markets. 

8. Some commenters recommend that 

the Commission adopt a framework that 

would facilitate deregulating quickly in 

anticipation of future competition. For 

example, AT&T recommends that, 

rather than perform a more granular 

analysis of individual petitions for 

pricing flexibility, the Commission 

extend blanket Phase I relief to all 

special access services, fully de-regulate 

OCn and packet-based services, and 

extend Phase II relief to areas where the 

existing competitive showing 

requirements do not fully detect the 

extent of competitive entry. Another 

analytic framework proposed by AT&T 

would examine whether the price cap 

rules are producing the marketplace 

benefits expected under incentive 

regulation. In particular, where 

evidence suggests that ‘‘carriers are 

investing to become more efficient and 

innovative, that carriers are working to 

provide better services at the same or 

lower prices, that competitors are 

responding with increased entry, and 

that output is increasing,’’ the 

Commission should conclude that 

pricing flexibility is operating properly 

in its current form. Competitive carriers, 

on the other hand, disagree that 

expectations of future competition 

warrant quick deregulation. They raise 

concerns that, particularly in Phase II 

markets, incumbent carriers have 

increased special access rates to 

supracompetitive levels. They assert 

that the Commission must adopt a 

regulatory framework that curtails this 

practice. Ad Hoc and Sprint, for 

example, propose a ‘‘hybrid approach,’’ 

in which carriers may obtain unlimited 

‘‘downward pricing flexibility’’ in 

combination with price caps in all 

markets. 

9. Incumbent carriers also propose 

that the Commission adopt a framework 

for analyzing requests for pricing 

flexibility that takes into account both 

actual and potential competition, such 

as competition from non-collocating 

providers or those competitors who 

could quickly enter the market in the 

near term. For example, AT&T and 

Verizon propose that the Commission 

permit pricing flexibility in areas where 

the competitive showing requirements 

are not met but carriers can point to 

sources of actual or potential 

competition, such as the existence of 

alternative fiber in the area served by 

specific wire centers or facilities-based 

competitors providing service in wire 

centers where there is no collocation. 

Verizon also argues that the 

Commission should modify the criteria 

for Phase II relief to allow price cap 

LECs to make a prima facie case that the 

competitive showings are satisfied by 

introducing evidence of competitive 

facilities in an MSA where insufficient 

competitive collocation exists to meet 

the competitive showing requirements. 

Some commenters, however, such as 

Public Knowledge and Time Warner 

Telecom, raise questions about the 

extent to which potential competition is 

germane to an analysis of special access 

market conditions. 

10. Finally, several commenters, in 

particular incumbent LECs, recommend 

that, prior to implementing a new 

framework for special access pricing 

flexibility, the Commission collect 

additional data to assess whether the 

current competitive showing rules are a 

reasonably accurate proxy for the 

presence of competition. For example, 

during the 2010 staff workshop, one 

economist suggested that the 

Commission 

[l]ook at areas with different degrees of 

competition and across such areas compare 

prices and measures of competition and other 

terms and conditions controlling for relative 

factors such as density, access lines, 

customer characteristics, and then use 

statistical analysis to see what you can say 

about the relationship between prices and 

measures of competition controlling for other 

costs or demand-based factors. 

In his view, such findings could 

potentially be used to evaluate the 

existing pricing flexibility rules and 

craft new or modified rules if the data 

indicate that the existing rules are 

deficient. Incumbent LECs assert that 

further data collection is necessary 

because competitive carriers did not 

provide sufficient data in response to 

the two voluntary data requests issued 

by the Commission in 2010 and 2011. 

Some competitive carriers, however, 

argue that it is not necessary for the 

Commission to collect additional data 

prior to adopting a new regulatory 

scheme for special access pricing 

flexibility. 

3. A One-Time, Multi-Faceted Market 

Analysis 

11. Based on our review of the record, 

we propose to conduct as one step in 

our proceeding a one-time, multifaceted market analysis to obtain a more 

accurate picture of competition for 

special access. In combination with the 

comprehensive data collection 

described in the above Report and 

Order, we expect that the market 

analysis we propose will best assist the 

Commission in evaluating market 

conditions for special access services 

and determining what regulatory 

changes, if any, are warranted in light of 

that analysis. 

12. We propose to perform a one-time, 

multi-faceted market analysis of the 

special access market designed to 

determine where and when special 

access prices are just and reasonable, 

and whether our current special access 

regulations help or hinder this desired 

outcome. We do not propose to conduct 

a simple market share or market 

concentration analysis. Rather, we will 

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use the data we are collecting in this 

Report and Order to identify measures 

of actual and potential competition that 

are good predictors of competitive 

behavior, for example, by demonstrating 

that prices tend to decline with 

increases in the intensity of various 

competition measures, holding other 

things constant. In undertaking that 

analysis we will consider evidence as to 

what leads firms, including competitive 

providers, to undertake infrastructure 

investments. In so doing, we will 

consider whether our current regulatory 

regime may be hindering, for example, 

by keeping prices low, competitive 

investments that would reduce or 

obviate the need for regulation. The 

analysis will seek to control for factors 

that could reasonably be expected to 

affect prices and competitive 

investment, such as actual and potential 

competition from services that are 

substitutes for special access (regardless 

of technology), the nature of the services 

supplied, demand intensity, historical 

proximity and state and federal 

regulation. The one-time, multi-faceted 

market analysis will help the 

Commission determine whether any 

market participants have market power 

and, if so, where such market power 

exists. This will better allow us to 

determine the sources of such market 

power, the likely extent to which it is 

sustainable over time, and how to 

construct (where required) targeted 

regulatory remedies. In addition, the 

analysis should help the Commission 

determine what barriers inhibit 

investment and delay competition, 

including regulatory barriers, and any 

other barriers, and what steps the 

Commission could take to remove such 

barriers to promote a robust competitive 

market and permit the competitive 

determination of price levels. 

13. As part of our one-time, multifaceted market analysis we propose to 

conduct panel regressions designed to 

determine how the intensity of 

competition (or lack thereof), whether 

actual or potential, affects prices, 

controlling for all other factors that 

affect prices. Specifically, we propose to 

undertake econometric modeling to 

estimate the effect of competition from 

facilities-based providers, among other 

things, on the prices of special access 

services. The modeling would develop 

panel regressions of the prices for 

special access on characteristics such as: 

(1) The number of facilities-based 

competitors (both actual and potential); 

(2) the availability of, pricing of, and 

demand for best efforts business 

broadband Internet access services; (3) 

the characteristics of the purchased 

service; and (4) other factors that 

influence the pricing decisions of 

special access providers, including cost 

determinants (e.g., density of sales) and 

factors that deliver economies of scale 

and scope (e.g., level of sales). The 

panel regressions (and our analysis 

more generally) would seek to control 

for the fact that firms set prices and 

make competitive investment decisions 

taking into account a variety of factors, 

including existing and expected prices, 

investments (including as informed by 

advertised offerings), and regulatory 

rules (e.g., whether the incumbent has 

received pricing flexibility and for what 

services). In particular, we expect to 

control for the fact that prices, which 

regulation impacts, likely play a role in 

entry decisions. The precise form of 

econometric modeling we conduct will 

be dependent, in large part, on the 

nature and the quality of the data 

produced in response to the Order. We 

expect that the output of such panel 

regressions will assist us in delineating 

both relevant product and geographic 

markets. In conjunction with data on 

providers’ business rules, it will also 

help us predict where and how 

potential competition will occur, as 

noted above. 

14. There are three key reasons for our 

proposal to undertake a one-time, multifaceted market analysis. First, a dataintensive market analysis will enable us 

to determine more precisely where, and 

to what extent, actual and potential 

competition for special access is likely 

to constrain prices as well as the factors 

that drive investment and competition, 

as described above. At this time there is 

insufficient evidence in the record upon 

which to base general or categorical 

conclusions as to the competitiveness of 

the special access market. Likewise, the 

record provides an insufficient basis for 

us to identify reliable competitive 

showing rules for granting pricing 

flexibility in defined geographic areas 

going forward. As a result, we believe 

that a one-time, multi-faceted market 

analysis, performed in conjunction with 

a comprehensive data collection, will 

aid the Commission in developing better 

tests for regulatory relief to replace the 

collocation-based standards. 

15. Second, a one-time, multi-faceted 

market analysis will benefit special 

access providers and purchasers by 

facilitating a thorough assessment of 

competitive conditions. For example, a 

wide range of commenters, including 

incumbent providers, competitive 

providers, and other interested parties, 

state that the Commission cannot gauge 

the extent of competition based on a 

single market characteristic, such as 

purchase prices, carrier revenues, or 

market share. We agree, and we believe 

that the Commission must conduct a 

more comprehensive analysis of the 

state of competition prior to replacing 

the rules by which incumbent LECs may 

obtain regulatory relief in the provision 

of special access services. We propose to 

conduct a nuanced market analysis that 

incorporates a variety of factors, as 

detailed above, to assess the effect of 

competition on special access prices. 

16. Third, a one-time, multi-faceted 

market analysis supplements a 

structural market analysis with 

econometrically sound panel 

regressions. The Commission has 

repeatedly undertaken structural market 

analyses to assess competition for 

telecommunications services and 

determine whether deregulation is 

warranted. Historically, the 

Commission’s structural analysis— 

which focused on certain ‘‘clearly 

identifiable market features,’’ including 

a carrier’s market share, number and 

size distribution of competing firms, the 

nature of competitors’ barriers to entry, 

the availability of reasonably 

substitutable services, the level of 

demand elasticity, and whether the firm 

controlled bottleneck facilities—was 

designed to identify where competition 

is sufficient to constrain carriers from 

charging unjust or unreasonable rates, or 

from acting in an otherwise 

anticompetitive manner. The one-time, 

multi-faceted market analysis follows 

this precedent by incorporating a 

structural market analysis, but it also 

goes further by supplementing the 

analysis with econometrically sound 

panel regressions to determine how the 

intensity of competition (or lack 

thereof), whether actual or potential, 

affects prices, controlling for all other 

factors that affect prices. 

4. Request for Comment on One-Time, 

Multi-Faceted Market Proposed 

Analysis 

17. We seek comment on this onetime, multi-faceted market analysis. In 

contrast to the approach of our pricing 

flexibility rules, which are currently 

suspended, we anticipate that this 

analysis is likely to identify all 

significant current and potential market 

participants, and consider their effect 

when assessing the level of competition 

in a market. We seek comment on this 

conclusion. Are there significant 

competitors who would not be easily 

accounted for under the proposed 

analysis, such as firms who self-supply 

their own special access? Is such an 

approach likely to show whether a 

specific provider is a probable source of 

competition in a given geographic area, 

i.e., that its presence could reasonably 

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be found to constrain special access 

prices? 

18. Will the proposed one-time, multifaceted market analysis facilitate a 

comprehensive, forward-looking 

evaluation of competitive conditions? 

Should certain factors be weighted more 

or less heavily in our analysis? How can 

we balance the need for an analysis that 

is forward-looking with the importance 

of relying on non-speculative data? 

19. Does the one-time, multi-faceted 

market analysis effectively address 

concerns regarding use of a traditional 

structural analysis in this context? For 

example, incumbent LECs assert that 

special access pricing flexibility should 

not be treated as akin to the dominance/ 

non-dominance analyses undertaken by 

the Commission in the Competitive 

Carrier proceeding. They argue that a 

dominance/non-dominance analysis is 

inappropriate in the special access 

context because ‘‘[t]he pricing flexibility 

rules are merely an incremental measure 

within the context of dominant carrier 

regulation.’’ Does the one-time, multifaceted market analysis with panel 

regressions address these concerns? 

20. Will the market analysis we 

propose facilitate a useful examination 

of potential barriers to broadband 

deployment and investment? AT&T 

recently argued that the Commission’s 

special access rules have hindered 

carriers’ transition to IP-based services, 

and that they encourage reliance on 

legacy services. How can we structure 

our analysis to appropriately take into 

account the fact that some carriers may 

be transitioning away from legacy 

services toward IP-enabled services? 

How can we structure our analysis to 

account for all services that enterprise 

customers view as substitutable, 

including services used by small- and 

medium-sized businesses? How should 

we analyze the markets to determine the 

effect that various federal regulations 

have on the pricing and deployment 

decisions of providers as well as the 

purchasing decisions of customers? 

21. Specifically, how should our 

analysis account for ‘‘best efforts’’ 

services? To the extent best efforts 

services are potential substitutes for 

special access services, how should the 

price of such services inform our 

analysis of the justness and 

reasonableness of special access 

pricing? 

22. Finally, we seek comment on how 

best to balance the need for analytic 

rigor with the requirement that our 

analysis be administratively feasible. 

We note that commenters have raised 

concerns about the administrative 

feasibility of a market analysis, in 

particular with respect to proposals to 

require individual market analyses on 

an ongoing basis in lieu of the 

competitive showing rules adopted in 

the Pricing Flexibility Order. We seek 

comment on whether, because we will 

be analyzing many facets of the market 

only one time, our analysis will give rise 

to the administrative burdens raised by 

some commenters in the record. 

23. We note that the analysis we 

propose conducting here is a one-time 

analysis. We are mindful of the 

importance of balancing the accuracy of 

our analysis with the need for 

administrative efficiency. The record 

makes clear that we are unlikely to be 

able to conduct a comprehensive market 

analysis—and thus are unlikely to be 

able to evaluate the impact of the 

suspended rules on the reasonableness 

of special access rates, terms and 

conditions or develop improved ones— 

without the data similar to that 

described above and a more detailed 

review of competitive conditions in the 

special access market than has been 

possible to date. However, we anticipate 

that the one-time, multi-faceted market 

analysis will allow us to identify 

reliable new proxies for special access 

competition, which could be employed 

going forward to evaluate petitions for 

pricing flexibility in a consistent, 

streamlined manner. The goal of the 

proposed market analysis is to gain a 

fulsome picture of competition in the 

special access market, so that we can 

develop rules to more precisely provide 

regulatory relief where it is justified. In 

subsection I.B., below, we seek 

comment on possible changes to our 

pricing flexibility rules that we might 

adopt after we collect the data specified 

above and conduct the proposed market 

analysis. 

24. To the extent that commenters 

assert that a one-time, multi-faceted 

market analysis is not necessary or 

appropriate at this time, we urge such 

commenters to propose alternate actions 

that the Commission could take in the 

near future to obtain a more complete 

understanding of competitive 

conditions for special access services. 

Commenters are also encouraged to 

submit data to support their assertions, 

particularly those arguments concerning 

special access market conditions. 

B. Possible Changes to Pricing 

Flexibility Rules After Proposed OneTime, Multi-Faceted Market Analysis 

25. As discussed above, our market 

analysis is intended to provide a more 

complete picture of special access 

competition. The comprehensive data 

request described in the Report and 

Order above will identify and require 

submission of the data needed to 

implement any market analysis we 

adopt, including the specific analysis 

proposed in this Further Notice. Once 

the data are collected and analyzed, we 

may modify the existing pricing 

flexibility rules or adopt a new set of 

rules that will apply to requests for 

special access pricing flexibility. As a 

general matter, however, we propose to 

adopt rules that will allow for the 

relaxation or even the elimination of 

price cap regulation where we find the 

presence of actual or potential 

competition sufficient to ensure that 

rates, terms and conditions for special 

access services remain just and 

reasonable. To that end, we seek 

comment on how the special access 

pricing flexibility rules might change 

after we conduct the market analysis 

proposed above. We also seek comment 

below on what steps the Commission 

should take where relief has been 

provided under our existing rules and 

where the data and our analysis 

demonstrate that competition is not 

sufficient to discipline the marketplace. 

26. Factors Demonstrating 

Competition. Our proposed analysis 

may enable us to identify specific 

factors that could serve as a proxy for 

the presence or absence of special 

access competition in an identified 

geographic area. The competitive 

showing rules adopted in the 1999 

Pricing Flexibility Order were intended 

to serve such a purpose; however, as the 

Commission noted in the Special Access 

Pricing Flexibility Suspension Order, 

those rules were not an effective proxy 

for special access competition as 

predicted in the Pricing Flexibility 

Order. We seek comment on the 

viability of proxies as a means of 

measuring special access competition 

going forward. Should we replace our 

MSA- and collocation-based 

competitive showing rules with proxy 

rules based on specific factors identified 

by our analysis? Or is it preferable to 

evaluate competition on a case-by-case 

approach? Alternatively, should our 

rules incorporate elements of both a 

proxy-based and a case-by-case 

approach? 

27. For those commenters who 

advocate a case-by-case approach as 

opposed to proxy-based rules for pricing 

flexibility, we request input on how 

such a process could operate. Should 

the Commission, for example, perform a 

market analysis in response to 

individual petitions for pricing 

flexibility? If so, who should be eligible 

to submit such petitions? How might we 

reduce the potential administrative 

burdens associated with such a process? 

28. For those commenters who 

advocate a proxy-based approach, we 

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2604 Federal Register / Vol. 78, No. 8 / Friday, January 11, 2013 / Proposed Rules 

seek comment on what appropriate 

proxies for special access competition 

are. For example, in the Special Access 

Pricing Flexibility Suspension Order, we 

used business establishment density as 

one means of measuring business 

density within an MSA. Could business 

establishment density be an appropriate 

proxy for special access competition? 

Again, we expect that our data 

collection and proposed regression 

analysis will prove informative on this 

issue. However, in light of the 

suspension of the collocation-based 

triggers in the Special Access Pricing 

Flexibility Suspension Order, we 

welcome feedback on what a more 

accurate proxy might be. How could we 

craft rules to enable us to easily but 

effectively identify the existence of 

competition in a given geographic area? 

29. We also seek particular comment 

on how to evaluate potential 

competition. How might the rules 

incorporate the factors identified by our 

analysis in determining where 

competition is likely to occur in the 

future? Conversely, how might the rules 

be crafted to account for areas where 

competition may decline in the future? 

30. Nature of Relief. Our market 

analysis may indicate that different 

levels of competition warrant various 

levels of relief from regulation. We seek 

comment on what the appropriate level 

of relief is for various types of 

competition. For example, is it still 

appropriate to grant Phase I and Phase 

II pricing flexibility and, if so, what 

factors should guide the level of relief 

granted? Or are there some other 

variations of pricing deregulation we 

should adopt? Is it appropriate, as 

incumbent LECs such as AT&T assert, to 

remove all dominant carrier regulations 

from those areas we deem competitive? 

Are there other approaches? For 

example, should Phase I or Phase II 

relief only be available to those 

providers whose special access prices 

meet specific cost benchmarks, as 

proposed by a subset of special access 

purchasers? What rules should we adopt 

in those areas which our data, and a 

sound market analysis, show are likely 

to be competitive in the future? 

31. Updating Competition Data. We 

seek comment on whether and how the 

competitive information derived from 

the regression analysis should be 

updated. If so, how often should the 

data be updated? What process could 

the Commission employ to provide for 

recurrent updates of the competition 

data? 

32. Geographic Area. In addition to 

providing information on the issues 

described above, the regression analysis 

proposed in this Further Notice may 

help identify with geographic precision 

those areas that are subject to actual and 

potential special access competition 

today. For example, the analysis may 

enable the Commission to create a map 

of the United States that details the 

extent of competition with respect to 

special access services, including 

potential competition, in different areas 

of the country. We seek comment on 

whether and how the Commission could 

use a granular geographic analysis of 

competition to modify its existing 

regulatory treatment of special access 

services. In particular, in addition to 

any proxies adopted to grant special 

access relief on a forward-going basis, 

should the Commission relieve 

incumbent LEC special access providers 

from price cap regulations in geographic 

areas that the analysis identifies as 

subject to competition? Should the 

Commission adopt a presumption that 

pricing flexibility is warranted in such 

areas? If so, should the Commission 

presume that Phase I relief or Phase II 

relief, or a combination of both, is 

appropriate? 

33. Conversely, what should the 

Commission do if the analysis indicates 

that areas in which incumbent LECs 

have been granted pricing flexibility are 

not subject to competition? Some parties 

have suggested that the Commission 

should require incumbent LEC special 

access providers to automatically revert 

to price caps in areas without 

competition, while others have asserted 

that such a conversion would be 

impractical, unlawful, and unsupported 

by the record. We seek comment on 

these proposals, and other potential 

approaches. Should the Commission 

require parties to prove harm, i.e., that 

rates, terms and/or conditions are unjust 

and unreasonable, before changing the 

rules applicable to an area that where 

Phase I or Phase II relief has previously 

been granted? The Commission 

previously has sought comment on how 

to validate or rebut assertions that the 

current price cap rules are ensuring just 

and reasonable rates. Parties should 

include any new information or 

arguments that may be relevant to the 

Commission’s consideration of what 

action, if any, may be appropriate with 

respect to modifying or updating our 

price cap rules. 

34. Should the Commission 

incorporate a petition process by which 

a party can rebut a presumption that 

competition does or does not exist in a 

given geographic area? If so, who should 

be permitted to file such petitions and 

what showing should they be required 

to make? Alternatively, should the 

Commission adopt a petition process 

that requires carriers or others to 

supplement the results of our analysis to 

support specific requests for changes in 

regulatory treatment? If geographic areas 

are subject to regulatory adjustment 

based on such a petition process, who 

should be eligible to submit such 

petitions and how will they obtain 

access to the data they need to evaluate 

the existence of competition? Which 

regulatory changes should be covered by 

the petition process (e.g., removal of 

price caps, reversion to price caps, 

change in status from Phase I to Phase 

II regulatory relief and vice versa)? If the 

Commission were to adopt any of the 

changes proposed above, what would be 

an appropriate transition period for 

such regulatory changes to take effect? 

What steps should we take to ensure 

that regulatory changes occur smoothly 

and predictably? 

35. Our record contains a great deal of 

discussion about the appropriate 

geographic market to measure special 

access competition for the purposes of 

evaluating requests for pricing 

flexibility. Commenters have suggested, 

for example, that the Commission assess 

special access competition at the MSA 

level, at the wire center level, and on a 

building-by-building or a route-specific 

basis. We seek to refresh the record on 

this issue based on the additional data 

that will be collected. What geographic 

area would be the most appropriate for 

us to employ in new or modified special 

access rules? How can we balance the 

potential administrative costs of a more 

granular review with the possible 

concerns associated with applying our 

pricing flexibility rules to large 

geographic areas? How could the results 

of our proposed regression analysis be 

incorporated into new or modified 

pricing flexibility rules? For instance, 

how should the Commission utilize a 

competition map, as described above, to 

select an appropriate geographic area for 

measuring special access competition? 

How could our rules account for likely 

variance in network footprints among 

classes of providers (for example, cable 

companies may have a nationwide 

footprint, while incumbent LECs and 

competitive LECs more often offer 

service on a regional basis). 

C. Terms and Conditions 

36. To more fully understand 

competition in the special access market 

and appropriately craft rules for 

regulatory relief, we will also seek data 

and information on the terms and 

conditions offered by incumbent LECs 

for special access services. The Special 

Access NPRM initiated a broad 

examination of what regulatory 

framework to apply to price cap LECs’ 

interstate special access services 

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following the expiration of the CALLS 

plan. In addition to asking whether to 

maintain or modify the Commission’s 

pricing flexibility rules, the Commission 

sought comment on whether any of the 

terms and conditions under which 

incumbent LECs provide special access 

are exclusionary and unreasonable. The 

Bureau subsequently sought data and 

information on this issue in the Special 

Access Competition Data Public Notice. 

The record would benefit from 

additional, specific, and detailed 

discussion of terms and conditions 

which are alleged to be unjust or 

unreasonable. 

37. The reasonableness of terms and 

conditions has triggered a significant 

amount of debate in the last two years. 

Purchasers allege that to provide a 

viable retail service they must enter into 

volume and term commitment plans 

with incumbent LECs to obtain price 

discounts and circuit portability 

benefits that are critical to their ability 

to remain competitive. Purchasers 

further allege these plans are subject to 

shortfall, overage, and early termination 

penalties that, combined with the 

potential loss of a discount for failing to 

meet the requisite commitment level, 

effectively lock-in demand and deter 

market entry by preventing purchasers 

from switching to a competing provider. 

Parties also allege that incumbent LECs 

are engaging in anticompetitive tying 

arrangements that give purchasers 

benefits for services purchased in areas 

where the incumbent has market power 

in exchange for the purchase of services 

in more competitive markets. Incumbent 

LECs vigorously dispute these 

allegations. 

38. In light of this record, we seek 

data and information related to this 

issue in the comprehensive data request 

described above, and seek comment on 

these allegations. What specific terms 

and conditions do commenters find 

unjust or unreasonable, and in what 

contexts? Are there terms and 

conditions that are unjust or 

unreasonable only when imposed in 

areas where a provider has market 

power? If so, is the analysis we propose 

above sufficient to allow us to identify 

areas where market power exists, and 

thus to determine whether a particular 

term or condition is unreasonable in a 

given area or that anticompetitive tying 

between competitive and noncompetitive areas is occurring? If so, 

what would be the most effective 

remedy or remedies? 

II. Procedural Matters 

A. Paperwork Reduction Act Analysis 

39. This document does not contain 

proposed information collection 

requirements subject to the Paperwork 

Reduction Act of 1995, Public Law 104– 

13. In addition, therefore, it does not 

contain any proposed information 

collection burden ‘‘for small business 

concerns with fewer than 25 

employees,’’ pursuant to the Small 

Business Paperwork Relief Act of 2002, 

Public Law 107–198, see 44 U.S.C. 

3506(c)(4). 

B. Initial Regulatory Flexibility Analysis 

40. As required by the Regulatory 

Flexibility Act of 1980, as amended 

(RFA), the Commission has prepared 

this present Initial Regulatory 

Flexibility Analysis (IRFA) of the 

possible significant economic impact on 

a substantial number of small entities by 

the policies and rules proposed in the 

FNPRM. Written public comments are 

requested on this IRFA. Comments must 

be identified as responses to the IRFA 

and must be filed by the deadlines for 

comments on the FNPRM provided in 

section V.C of the item. The 

Commission will send a copy of the 

FNPRM, including this IRFA, to the 

Chief Counsel for Advocacy of the Small 

Business Administration (SBA). In 

addition, the FNPRM and IRFA (or 

summaries thereof) will be published in 

the Federal Register. 

1. Need for, and Objectives of, the 

Proposed Rules 

41. In this FNPRM we commence a 

process to more effectively determine 

where relief from special access 

regulation is appropriate and otherwise 

update our special access rules to 

ensure that they reflect the state of 

competition today and promote 

competition, investment, and access to 

dedicated communications services 

businesses across the country rely on 

every day to deliver their products and 

services to American consumers. In 

Section I.A we propose and seek 

comment on a market analysis that we 

intend to undertake in the coming 

months to assist the Commission in 

evaluating whether the pricing 

flexibility rules result in just and 

reasonable special access rates and what 

regulatory changes may be needed. In 

section IV.B we seek comment on how 

the special access pricing flexibility 

rules might change after we conduct our 

market analysis. We also seek comment 

on what steps the Commission should 

take where relief has been provided 

under our existing rules and where the 

data and our analysis demonstrate that 

competition is not sufficient to 

discipline the marketplace. Finally, we 

seek in section IV.C comment on the 

terms and conditions offered by 

incumbent LECs for special access 

services to facilitate our understanding 

of competition in the special access 

market and our ability to craft rules for 

regulatory relief that properly address 

the state of the marketplace. 

2. Legal Basis 

42. This rulemaking action is 

supported by sections 1, 4(i), 4(j), 5, 

201–205, 211, 215, 218, 219, 303(r), 332, 

403, and 503 of the Communications 

Act of 1934, as amended. 

3. Description and Estimate of the 

Number of Small Entities to Which the 

Notice Will Apply 

43. The RFA directs agencies to 

provide a description of, and where 

feasible, an estimate of the number of 

small entities that may be affected by 

the proposed rules, if adopted. The RFA 

generally defines the term ‘‘small 

entity’’ as having the same meaning as 

the terms ‘‘small business,’’ ‘‘small 

organization,’’ and ‘‘small governmental 

jurisdiction.’’ In addition, the term 

‘‘small business’’ has the same meaning 

as the term ‘‘small-business concern’’ 

under the Small Business Act. A smallbusiness concern’’ is one which: (1) Is 

independently owned and operated; (2) 

is not dominant in its field of operation; 

and (3) satisfies any additional criteria 

established by the SBA. SBA restated its 

concerns in its comments filed in 2007. 

44. Small Businesses. Nationwide, 

there are a total of approximately 27.5 

million small businesses, according to 

the SBA. 

45. Wired Telecommunications 

Carriers. The SBA has developed a 

small business size standard for Wired 

Telecommunications Carriers, which 

consists of all such companies having 

1,500 or fewer employees. According to 

Census Bureau data for 2007, there were 

3,188 firms in this category, total, that 

operated for the entire year. Of this 

total, 3144 firms had employment of 999 

or fewer employees, and 44 firms had 

employment of 1000 employees or 

more. Thus, under this size standard, 

the majority of firms can be considered 

small. 

46. Local Exchange Carriers (LECs). 

Neither the Commission nor the SBA 

has developed a size standard for small 

businesses specifically applicable to 

local exchange services. The closest 

applicable size standard under SBA 

rules is for Wired Telecommunications 

Carriers. Under that size standard, such 

a business is small if it has 1,500 or 

fewer employees. According to 

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Commission data, 1,307 carriers 

reported that they were incumbent local 

exchange service providers. Of these 

1,307 carriers, an estimated 1,006 have 

1,500 or fewer employees and 301 have 

more than 1,500 employees. 

Consequently, the Commission 

estimates that most providers of local 

exchange service are small entities that 

may be affected by the rules and 

policies proposed in the Order. 

47. Incumbent Local Exchange 

Carriers (incumbent LECs). Neither the 

Commission nor the SBA has developed 

a size standard for small businesses 

specifically applicable to incumbent 

local exchange services. The closest 

applicable size standard under SBA 

rules is for Wired Telecommunications 

Carriers. Under that size standard, such 

a business is small if it has 1,500 or 

fewer employees. According to 

Commission data, 1,307 carriers 

reported that they were incumbent local 

exchange service providers. Of these 

1,307 carriers, an estimated 1,006 have 

1,500 or fewer employees and 301 have 

more than 1,500 employees. 

Consequently, the Commission 

estimates that most providers of 

incumbent local exchange service are 

small businesses that may be affected by 

rules adopted pursuant to the Order. 

48. We have included small 

incumbent LECs in this present RFA 

analysis. As noted above, a ‘‘small 

business’’ under the RFA is one that, 

inter alia, meets the pertinent small 

business size standard (e.g., a telephone 

communications business having 1,500 

or fewer employees), and ‘‘is not 

dominant in its field of operation.’’ The 

SBA’s Office of Advocacy contends that, 

for RFA purposes, small incumbent 

LECs are not dominant in their field of 

operation because any such dominance 

is not ‘‘national’’ in scope. We have 

therefore included small incumbent 

LECs in this RFA analysis, although we 

emphasize that this RFA action has no 

effect on Commission analyses and 

determinations in other, non-RFA 

contexts. 

49. Competitive Local Exchange 

Carriers (competitive LECs), Competitive 

Access Providers (CAPs), Shared-Tenant 

Service Providers, and Other Local 

Service Providers. Neither the 

Commission nor the SBA has developed 

a small business size standard 

specifically for these service providers. 

The appropriate size standard under 

SBA rules is for the category Wired 

Telecommunications Carriers. Under 

that size standard, such a business is 

small if it has 1,500 or fewer employees. 

According to Commission data, 1,442 

carriers reported that they were engaged 

in the provision of either competitive 

local exchange services or competitive 

access provider services. Of these 1,442 

carriers, an estimated 1,256 have 1,500 

or fewer employees and 186 have more 

than 1,500 employees. In addition, 17 

carriers have reported that they are 

Shared-Tenant Service Providers, and 

all 17 are estimated to have 1,500 or 

fewer employees. In addition, 72 

carriers have reported that they are 

Other Local Service Providers. Of the 

72, seventy have 1,500 or fewer 

employees and two have more than 

1,500 employees. Consequently, the 

Commission estimates that most 

providers of competitive local exchange 

service, competitive access providers, 

Shared-Tenant Service Providers, and 

Other Local Service Providers are small 

entities that may be affected by rules 

adopted pursuant to the Order. 

50. Interexchange Carriers (IXCs). 

Neither the Commission nor the SBA 

has developed a size standard for small 

businesses specifically applicable to 

interexchange services. The closest 

applicable size standard under SBA 

rules is for Wired Telecommunications 

Carriers. Under that size standard, such 

a business is small if it has 1,500 or 

fewer employees. According to 

Commission data, 359 companies 

reported that their primary 

telecommunications service activity was 

the provision of interexchange services. 

Of these 359 companies, an estimated 

317 have 1,500 or fewer employees and 

42 have more than 1,500 employees. 

Consequently, the Commission 

estimates that the majority of 

interexchange service providers are 

small entities that may be affected by 

rules adopted pursuant to the Order. 

51. Prepaid Calling Card Providers. 

Neither the Commission nor the SBA 

has developed a small business size 

standard specifically for prepaid calling 

card providers. The appropriate size 

standard under SBA rules is for the 

category Telecommunications Resellers. 

Under that size standard, such a 

business is small if it has 1,500 or fewer 

employees. According to Commission 

data, 193 carriers have reported that 

they are engaged in the provision of 

prepaid calling cards. Of these, an 

estimated all 193 have 1,500 or fewer 

employees and none have more than 

1,500 employees. Consequently, the 

Commission estimates that the majority 

of prepaid calling card providers are 

small entities that may be affected by 

rules adopted pursuant to the Order. 

52. Local Resellers. The SBA has 

developed a small business size 

standard for the category of 

Telecommunications Resellers. Under 

that size standard, such a business is 

small if it has 1,500 or fewer employees. 

According to Commission data, 213 

carriers have reported that they are 

engaged in the provision of local resale 

services. Of these, an estimated 211 

have 1,500 or fewer employees and two 

have more than 1,500 employees. 

Consequently, the Commission 

estimates that the majority of local 

resellers are small entities that may be 

affected by rules adopted pursuant to 

the Order. 

53. Toll Resellers. The SBA has 

developed a small business size 

standard for the category of 

Telecommunications Resellers. Under 

that size standard, such a business is 

small if it has 1,500 or fewer employees. 

According to Commission data, 881 

carriers have reported that they are 

engaged in the provision of toll resale 

services. Of these, an estimated 857 

have 1,500 or fewer employees and 24 

have more than 1,500 employees. 

Consequently, the Commission 

estimates that the majority of toll 

resellers are small entities that may be 

affected by rules adopted pursuant to 

the Order. 

54. Other Toll Carriers. Neither the 

Commission nor the SBA has developed 

a size standard for small businesses 

specifically applicable to Other Toll 

Carriers. This category includes toll 

carriers that do not fall within the 

categories of interexchange carriers, 

operator service providers, prepaid 

calling card providers, satellite service 

carriers, or toll resellers. The closest 

applicable size standard under SBA 

rules is for Wired Telecommunications 

Carriers. Under that size standard, such 

a business is small if it has 1,500 or 

fewer employees. According to 

Commission data, 284 companies 

reported that their primary 

telecommunications service activity was 

the provision of other toll carriage. Of 

these, an estimated 279 have 1,500 or 

fewer employees and five have more 

than 1,500 employees. Consequently, 

the Commission estimates that most 

Other Toll Carriers are small entities 

that may be affected by the rules and 

policies adopted pursuant to the Order. 

55. 800 and 800-Like Service 

Subscribers. Neither the Commission 

nor the SBA has developed a small 

business size standard specifically for 

800 and 800-like service (toll free) 

subscribers. The appropriate size 

standard under SBA rules is for the 

category Telecommunications Resellers. 

Under that size standard, such a 

business is small if it has 1,500 or fewer 

employees. The most reliable source of 

information regarding the number of 

these service subscribers appears to be 

data the Commission collects on the 

800, 888, 877, and 866 numbers in use. 

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According to our data, as of September 

2009, the number of 800 numbers 

assigned was 7,860,000; the number of 

888 numbers assigned was 5,588,687; 

the number of 877 numbers assigned 

was 4,721,866; and the number of 866 

numbers assigned was 7,867,736. We do 

not have data specifying the number of 

these subscribers that are not 

independently owned and operated or 

have more than 1,500 employees, and 

thus are unable at this time to estimate 

with greater precision the number of toll 

free subscribers that would qualify as 

small businesses under the SBA size 

standard. Consequently, we estimate 

that there are 7,860,000 or fewer small 

entity 800 subscribers; 5,588,687 or 

fewer small entity 888 subscribers; 

4,721,866 or fewer small entity 877 

subscribers; and 7,867,736 or fewer 

small entity 866 subscribers. 

56. Wireless Telecommunications 

Carriers (except Satellite). Since 2007, 

the SBA has recognized wireless firms 

within this new, broad, economic 

census category. Prior to that time, such 

firms were within the now-superseded 

categories of Paging and Cellular and 

Other Wireless Telecommunications. 

Under the present and prior categories, 

the SBA has deemed a wireless business 

to be small if it has 1,500 or fewer 

employees. For this category, census 

data for 2007 show that there were 1,383 

firms that operated for the entire year. 

Of this total, 1,368 firms had 

employment of 999 or fewer employees 

and 15 had employment of 1000 

employees or more. Similarly, according 

to Commission data, 413 carriers 

reported that they were engaged in the 

provision of wireless telephony, 

including cellular service, Personal 

Communications Service (PCS), and 

Specialized Mobile Radio (SMR) 

Telephony services. Of these, an 

estimated 261 have 1,500 or fewer 

employees and 152 have more than 

1,500 employees. Consequently, the 

Commission estimates that 

approximately half or more of these 

firms can be considered small. Thus, 

using available data, we estimate that 

the majority of wireless firms can be 

considered small. 

57. Broadband Personal 

Communications Service. The 

broadband personal communications 

service (PCS) spectrum is divided into 

six frequency blocks designated A 

through F, and the Commission has held 

auctions for each block. The 

Commission defined ‘‘small entity’’ for 

Blocks C and F as an entity that has 

average gross revenues of $40 million or 

less in the three previous calendar 

years. For Block F, an additional 

classification for ‘‘very small business’’ 

was added and is defined as an entity 

that, together with its affiliates, has 

average gross revenues of not more than 

$15 million for the preceding three 

calendar years. These standards 

defining ‘‘small entity’’ in the context of 

broadband PCS auctions have been 

approved by the SBA. No small 

businesses, within the SBA-approved 

small business size standards bid 

successfully for licenses in Blocks A 

and B. There were 90 winning bidders 

that qualified as small entities in the 

Block C auctions. A total of 93 small 

and very small business bidders won 

approximately 40 percent of the 1,479 

licenses for Blocks D, E, and F. In 1999, 

the Commission re-auctioned 347 C, E, 

and F Block licenses. There were 48 

small business winning bidders. In 

2001, the Commission completed the 

auction of 422 C and F Broadband PCS 

licenses in Auction 35. Of the 35 

winning bidders in this auction, 29 

qualified as ‘‘small’’ or ‘‘very small’’ 

businesses. Subsequent events, 

concerning Auction 35, including 

judicial and agency determinations, 

resulted in a total of 163 C and F Block 

licenses being available for grant. In 

2005, the Commission completed an 

auction of 188 C block licenses and 21 

F block licenses in Auction 58. There 

were 24 winning bidders for 217 

licenses. Of the 24 winning bidders, 16 

claimed small business status and won 

156 licenses. In 2007, the Commission 

completed an auction of 33 licenses in 

the A, C, and F Blocks in Auction 71. 

Of the 14 winning bidders, six were 

designated entities. In 2008, the 

Commission completed an auction of 20 

Broadband PCS licenses in the C, D, E 

and F block licenses in Auction 78. 

58. Advanced Wireless Services. In 

2008, the Commission conducted the 

auction of Advanced Wireless Services 

(‘‘AWS’’) licenses. This auction, which 

as designated as Auction 78, offered 35 

licenses in the AWS 1710–1755 MHz 

and 2110–2155 MHz bands (‘‘AWS–1’’). 

The AWS–1 licenses were licenses for 

which there were no winning bids in 

Auction 66. That same year, the 

Commission completed Auction 78. A 

bidder with attributed average annual 

gross revenues that exceeded $15 

million and did not exceed $40 million 

for the preceding three years (‘‘small 

business’’) received a 15 percent 

discount on its winning bid. A bidder 

with attributed average annual gross 

revenues that did not exceed $15 

million for the preceding three years 

(‘‘very small business’’) received a 25 

percent discount on its winning bid. A 

bidder that had combined total assets of 

less than $500 million and combined 

gross revenues of less than $125 million 

in each of the last two years qualified 

for entrepreneur status. Four winning 

bidders that identified themselves as 

very small businesses won 17 licenses. 

Three of the winning bidders that 

identified themselves as a small 

business won five licenses. 

Additionally, one other winning bidder 

that qualified for entrepreneur status 

won 2 licenses. 

59. Narrowband Personal 

Communications Services. In 1994, the 

Commission conducted an auction for 

Narrowband PCS licenses. A second 

auction was also conducted later in 

1994. For purposes of the first two 

Narrowband PCS auctions, ‘‘small 

businesses’’ were entities with average 

gross revenues for the prior three 

calendar years of $40 million or less. 

Through these auctions, the 

Commission awarded a total of 41 

licenses, 11 of which were obtained by 

four small businesses. To ensure 

meaningful participation by small 

business entities in future auctions, the 

Commission adopted a two-tiered small 

business size standard in the 

Narrowband PCS Second Report and 

Order. A ‘‘small business’’ is an entity 

that, together with affiliates and 

controlling interests, has average gross 

revenues for the three preceding years of 

not more than $40 million. A ‘‘very 

small business’’ is an entity that, 

together with affiliates and controlling 

interests, has average gross revenues for 

the three preceding years of not more 

than $15 million. The SBA has 

approved these small business size 

standards. A third auction was 

conducted in 2001. Here, five bidders 

won 317 (Metropolitan Trading Areas 

and nationwide) licenses. Three of these 

claimed status as a small or very small 

entity and won 311 licenses. 

60. Paging (Private and Common 

Carrier). In the Paging Third Report and 

Order, we developed a small business 

size standard for ‘‘small businesses’’ and 

‘‘very small businesses’’ for purposes of 

determining their eligibility for special 

provisions such as bidding credits and 

installment payments. A ‘‘small 

business’’ is an entity that, together with 

its affiliates and controlling principals, 

has average gross revenues not 

exceeding $15 million for the preceding 

three years. Additionally, a ‘‘very small 

business’’ is an entity that, together with 

its affiliates and controlling principals, 

has average gross revenues that are not 

more than $3 million for the preceding 

three years. The SBA has approved 

these small business size standards. 

According to Commission data, 291 

carriers have reported that they are 

engaged in Paging or Messaging Service. 

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Of these, an estimated 289 have 1,500 or 

fewer employees, and two have more 

than 1,500 employees. Consequently, 

the Commission estimates that the 

majority of paging providers are small 

entities that may be affected by our 

action. An auction of Metropolitan 

Economic Area licenses commenced on 

February 24, 2000, and closed on March 

2, 2000. Of the 2,499 licenses auctioned, 

985 were sold. Fifty-seven companies 

claiming small business status won 440 

licenses. A subsequent auction of MEA 

and Economic Area (‘‘EA’’) licenses was 

held in the year 2001. Of the 15,514 

licenses auctioned, 5,323 were sold. 

One hundred thirty-two companies 

claiming small business status 

purchased 3,724 licenses. A third 

auction, consisting of 8,874 licenses in 

each of 175 EAs and 1,328 licenses in 

all but three of the 51 MEAs, was held 

in 2003. Seventy-seven bidders claiming 

small or very small business status won 

2,093 licenses. A fourth auction, 

consisting of 9,603 lower and upper 

paging band licenses was held in the 

year 2010. Twenty-nine bidders 

claiming small or very small business 

status won 3,016 licenses. 

61. 220 MHz Radio Service—Phase I 

Licensees. The 220 MHz service has 

both Phase I and Phase II licenses. Phase 

I licensing was conducted by lotteries in 

1992 and 1993. There are approximately 

1,515 such non-nationwide licensees 

and four nationwide licensees currently 

authorized to operate in the 220 MHz 

band. The Commission has not 

developed a small business size 

standard for small entities specifically 

applicable to such incumbent 220 MHz 

Phase I licensees. To estimate the 

number of such licensees that are small 

businesses, we apply the small business 

size standard under the SBA rules 

applicable to Wireless 

Telecommunications Carriers (except 

Satellite). Under this category, the SBA 

deems a wireless business to be small if 

it has 1,500 or fewer employees. The 

Commission estimates that nearly all 

such licensees are small businesses 

under the SBA’s small business size 

standard that may be affected by rules 

adopted pursuant to the Order. 

62. 220 MHz Radio Service—Phase II 

Licensees. The 220 MHz service has 

both Phase I and Phase II licenses. The 

Phase II 220 MHz service is subject to 

spectrum auctions. In the 220 MHz 

Third Report and Order, we adopted a 

small business size standard for ‘‘small’’ 

and ‘‘very small’’ businesses for 

purposes of determining their eligibility 

for special provisions such as bidding 

credits and installment payments. This 

small business size standard indicates 

that a ‘‘small business’’ is an entity that, 

together with its affiliates and 

controlling principals, has average gross 

revenues not exceeding $15 million for 

the preceding three years. A ‘‘very small 

business’’ is an entity that, together with 

its affiliates and controlling principals, 

has average gross revenues that do not 

exceed $3 million for the preceding 

three years. The SBA has approved 

these small business size standards. 

Auctions of Phase II licenses 

commenced on September 15, 1998, and 

closed on October 22, 1998. In the first 

auction, 908 licenses were auctioned in 

three different-sized geographic areas: 

three nationwide licenses, 30 Regional 

Economic Area Group (EAG) Licenses, 

and 875 Economic Area (EA) Licenses. 

Of the 908 licenses auctioned, 693 were 

sold. Thirty-nine small businesses won 

licenses in the first 220 MHz auction. 

The second auction included 225 

licenses: 216 EA licenses and 9 EAG 

licenses. Fourteen companies claiming 

small business status won 158 licenses. 

63. Specialized Mobile Radio. The 

Commission awards small business 

bidding credits in auctions for 

Specialized Mobile Radio (‘‘SMR’’) 

geographic area licenses in the 800 MHz 

and 900 MHz bands to entities that had 

revenues of no more than $15 million in 

each of the three previous calendar 

years. The Commission awards very 

small business bidding credits to 

entities that had revenues of no more 

than $3 million in each of the three 

previous calendar years. The SBA has 

approved these small business size 

standards for the 800 MHz and 900 MHz 

SMR Services. The Commission has 

held auctions for geographic area 

licenses in the 800 MHz and 900 MHz 

bands. The 900 MHz SMR auction was 

completed in 1996. Sixty bidders 

claiming that they qualified as small 

businesses under the $15 million size 

standard won 263 geographic area 

licenses in the 900 MHz SMR band. The 

800 MHz SMR auction for the upper 200 

channels was conducted in 1997. Ten 

bidders claiming that they qualified as 

small businesses under the $15 million 

size standard won 38 geographic area 

licenses for the upper 200 channels in 

the 800 MHz SMR band. A second 

auction for the 800 MHz band was 

conducted in 2002 and included 23 BEA 

licenses. One bidder claiming small 

business status won five licenses. 

64. The auction of the 1,053 800 MHz 

SMR geographic area licenses for the 

General Category channels was 

conducted in 2000. Eleven bidders won 

108 geographic area licenses for the 

General Category channels in the 800 

MHz SMR band qualified as small 

businesses under the $15 million size 

standard. In an auction completed in 

2000, a total of 2,800 Economic Area 

licenses in the lower 80 channels of the 

800 MHz SMR service were awarded. Of 

the 22 winning bidders, 19 claimed 

small business status and won 129 

licenses. Thus, combining all three 

auctions, 40 winning bidders for 

geographic licenses in the 800 MHz 

SMR band claimed status as small 

business. 

65. In addition, there are numerous 

incumbent site-by-site SMR licensees 

and licensees with extended 

implementation authorizations in the 

800 and 900 MHz bands. We do not 

know how many firms provide 800 MHz 

or 900 MHz geographic area SMR 

pursuant to extended implementation 

authorizations, nor how many of these 

providers have annual revenues of no 

more than $15 million. One firm has 

over $15 million in revenues. In 

addition, we do not know how many of 

these firms have 1,500 or fewer 

employees. We assume, for purposes of 

this analysis, that all of the remaining 

existing extended implementation 

authorizations are held by small 

entities, as that small business size 

standard is approved by the SBA. 

66. Broadband Radio Service and 

Educational Broadband Service. 

Broadband Radio Service systems, 

previously referred to as Multipoint 

Distribution Service (‘‘MDS’’) and 

Multichannel Multipoint Distribution 

Service (‘‘MMDS’’) systems, and 

‘‘wireless cable,’’ transmit video 

programming to subscribers and provide 

two-way high speed data operations 

using the microwave frequencies of the 

Broadband Radio Service (‘‘BRS’’) and 

Educational Broadband Service (‘‘EBS’’) 

(previously referred to as the 

Instructional Television Fixed Service 

(‘‘ITFS’’)). In connection with the 1996 

BRS auction, the Commission 

established a small business size 

standard as an entity that had annual 

average gross revenues of no more than 

$40 million in the previous three 

calendar years. The BRS auctions 

resulted in 67 successful bidders 

obtaining licensing opportunities for 

493 Basic Trading Areas (‘‘BTAs’’). Of 

the 67 auction winners, 61 met the 

definition of a small business. BRS also 

includes licensees of stations authorized 

prior to the auction. At this time, we 

estimate that of the 61 small business 

BRS auction winners, 48 remain small 

business licensees. In addition to the 48 

small businesses that hold BTA 

authorizations, there are approximately 

392 incumbent BRS licensees that are 

considered small entities. After adding 

the number of small business auction 

licensees to the number of incumbent 

licensees not already counted, we find 

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that there are currently approximately 

440 BRS licensees that are defined as 

small businesses under either the SBA 

or the Commission’s rules. The 

Commission has adopted three levels of 

bidding credits for BRS: (i) A bidder 

with attributed average annual gross 

revenues that exceed $15 million and do 

not exceed $40 million for the preceding 

three years (small business) is eligible to 

receive a 15 percent discount on its 

winning bid; (ii) a bidder with 

attributed average annual gross revenues 

that exceed $3 million and do not 

exceed $15 million for the preceding 

three years (very small business) is 

eligible to receive a 25 percent discount 

on its winning bid; and (iii) a bidder 

with attributed average annual gross 

revenues that do not exceed $3 million 

for the preceding three years 

(entrepreneur) is eligible to receive a 35 

percent discount on its winning bid. In 

2009, the Commission conducted 

Auction 86, which offered 78 BRS 

licenses. Auction 86 concluded with ten 

bidders winning 61 licenses. Of the ten, 

two bidders claimed small business 

status and won 4 licenses; one bidder 

claimed very small business status and 

won three licenses; and two bidders 

claimed entrepreneur status and won 

six licenses. 

67. In addition, the SBA’s Cable 

Television Distribution Services small 

business size standard is applicable to 

EBS. There are presently 2,032 EBS 

licensees. All but 100 of these licenses 

are held by educational institutions. 

Educational institutions are included in 

this analysis as small entities. Thus, we 

estimate that at least 1,932 licensees are 

small businesses. Since 2007, Cable 

Television Distribution Services have 

been defined within the broad economic 

census category of Wired 

Telecommunications Carriers; that 

category is defined as follows: ‘‘This 

industry comprises establishments 

primarily engaged in operating and/or 

providing access to transmission 

facilities and infrastructure that they 

own and/or lease for the transmission of 

voice, data, text, sound, and video using 

wired telecommunications networks. 

Transmission facilities may be based on 

a single technology or a combination of 

technologies.’’ The SBA defines a small 

business size standard for this category 

as any such firms having 1,500 or fewer 

employees. The SBA has developed a 

small business size standard for this 

category, which is: all such firms having 

1,500 or fewer employees. According to 

Census Bureau data for 2007, there were 

a total of 955 firms in this previous 

category that operated for the entire 

year. Of this total, 939 firms had 

employment of 999 or fewer employees, 

and 16 firms had employment of 1000 

employees or more. Thus, under this 

size standard, the majority of firms can 

be considered small and may be affected 

by rules adopted pursuant to the Order. 

68. Lower 700 MHz Band Licenses. 

The Commission previously adopted 

criteria for defining three groups of 

small businesses for purposes of 

determining their eligibility for special 

provisions such as bidding credits. The 

Commission defined a ‘‘small business’’ 

as an entity that, together with its 

affiliates and controlling principals, has 

average gross revenues not exceeding 

$40 million for the preceding three 

years. A ‘‘very small business’’ is 

defined as an entity that, together with 

its affiliates and controlling principals, 

has average gross revenues that are not 

more than $15 million for the preceding 

three years. Additionally, the Lower 700 

MHz Band had a third category of small 

business status for Metropolitan/Rural 

Service Area (‘‘MSA/RSA’’) licenses, 

identified as ‘‘entrepreneur’’ and 

defined as an entity that, together with 

its affiliates and controlling principals, 

has average gross revenues that are not 

more than $3 million for the preceding 

three years. The SBA approved these 

small size standards. The Commission 

conducted an auction in 2002 of 740 

Lower 700 MHz Band licenses (one 

license in each of the 734 MSAs/RSAs 

and one license in each of the six 

Economic Area Groupings (EAGs)). Of 

the 740 licenses available for auction, 

484 licenses were sold to 102 winning 

bidders. Seventy-two of the winning 

bidders claimed small business, very 

small business or entrepreneur status 

and won a total of 329 licenses. The 

Commission conducted a second Lower 

700 MHz Band auction in 2003 that 

included 256 licenses: 5 EAG licenses 

and 476 Cellular Market Area licenses. 

Seventeen winning bidders claimed 

small or very small business status and 

won 60 licenses, and nine winning 

bidders claimed entrepreneur status and 

won 154 licenses. In 2005, the 

Commission completed an auction of 5 

licenses in the Lower 700 MHz Band, 

designated Auction 60. There were three 

winning bidders for five licenses. All 

three winning bidders claimed small 

business status. 

69. In 2007, the Commission 

reexamined its rules governing the 700 

MHz band in the 700 MHz Second 

Report and Order. The 700 MHz Second 

Report and Order revised the band plan 

for the commercial (including Guard 

Band) and public safety spectrum, 

adopted services rules, including 

stringent build-out requirements, an 

open platform requirement on the C 

Block, and a requirement on the D Block 

licensee to construct and operate a 

nationwide, interoperable wireless 

broadband network for public safety 

users. An auction of A, B and E block 

licenses in the Lower 700 MHz band 

was held in 2008. Twenty winning 

bidders claimed small business status 

(those with attributable average annual 

gross revenues that exceed $15 million 

and do not exceed $40 million for the 

preceding three years). Thirty three 

winning bidders claimed very small 

business status (those with attributable 

average annual gross revenues that do 

not exceed $15 million for the preceding 

three years). In 2011, the Commission 

conducted Auction 92, which offered 16 

Lower 700 MHz band licenses that had 

been made available in Auction 73 but 

either remained unsold or were licenses 

on which a winning bidder defaulted. 

Two of the seven winning bidders in 

Auction 92 claimed very small business 

status, winning a total of four licenses. 

70. Upper 700 MHz Band Licenses. In 

the 700 MHz Second Report and Order, 

the Commission revised its rules 

regarding Upper 700 MHz band 

licenses. In 2008, the Commission 

conducted Auction 73 in which C and 

D block licenses in the Upper 700 MHz 

band were available. Three winning 

bidders claimed very small business 

status (those with attributable average 

annual gross revenues that do not 

exceed $15 million for the preceding 

three years). 

71. 700 MHz Guard Band Licensees. 

In the 700 MHz Guard Band Order, we 

adopted a small business size standard 

for ‘‘small businesses’’ and ‘‘very small 

businesses’’ for purposes of determining 

their eligibility for special provisions 

such as bidding credits and installment 

payments. A ‘‘small business’’ is an 

entity that, together with its affiliates 

and controlling principals, has average 

gross revenues not exceeding $40 

million for the preceding three years. 

Additionally, a ‘‘very small business’’ is 

an entity that, together with its affiliates 

and controlling principals, has average 

gross revenues that are not more than 

$15 million for the preceding three 

years. An auction of 52 Major Economic 

Area (MEA) licenses commenced on 

September 6, 2000, and closed on 

September 21, 2000. Of the 104 licenses 

auctioned, 96 licenses were sold to nine 

bidders. Five of these bidders were 

small businesses that won a total of 26 

licenses. A second auction of 700 MHz 

Guard Band licenses commenced on 

February 13, 2001 and closed on 

February 21, 2001. All eight of the 

licenses auctioned were sold to three 

bidders. One of these bidders was a 

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small business that won a total of two 

licenses. 

72. Cellular Radiotelephone Service. 

Auction 77 was held to resolve one 

group of mutually exclusive 

applications for Cellular Radiotelephone 

Service licenses for unserved areas in 

New Mexico. Bidding credits for 

designated entities were not available in 

Auction 77. In 2008, the Commission 

completed the closed auction of one 

unserved service area in the Cellular 

Radiotelephone Service, designated as 

Auction 77. Auction 77 concluded with 

one provisionally winning bid for the 

unserved area totaling $25,002. 

73. Private Land Mobile Radio 

(‘‘PLMR’’). PLMR systems serve an 

essential role in a range of industrial, 

business, land transportation, and 

public safety activities. These radios are 

used by companies of all sizes operating 

in all U.S. business categories, and are 

often used in support of the licensee’s 

primary (non-telecommunications) 

business operations. For the purpose of 

determining whether a licensee of a 

PLMR system is a small business as 

defined by the SBA, we use the broad 

census category, Wireless 

Telecommunications Carriers (except 

Satellite). This definition provides that 

a small entity is any such entity 

employing no more than 1,500 persons. 

The Commission does not require PLMR 

licensees to disclose information about 

number of employees, so the 

Commission does not have information 

that could be used to determine how 

many PLMR licensees constitute small 

entities under this definition. We note 

that PLMR licensees generally use the 

licensed facilities in support of other 

business activities, and therefore, it 

would also be helpful to assess PLMR 

licensees under the standards applied to 

the particular industry subsector to 

which the licensee belongs. 

74. As of March 2010, there were 

424,162 PLMR licensees operating 

921,909 transmitters in the PLMR bands 

below 512 MHz. We note that any entity 

engaged in a commercial activity is 

eligible to hold a PLMR license, and that 

any revised rules in this context could 

therefore potentially impact small 

entities covering a great variety of 

industries. 

75. Rural Radiotelephone Service. The 

Commission has not adopted a size 

standard for small businesses specific to 

the Rural Radiotelephone Service. A 

significant subset of the Rural 

Radiotelephone Service is the Basic 

Exchange Telephone Radio System 

(‘‘BETRS’’). In the present context, we 

will use the SBA’s small business size 

standard applicable to Wireless 

Telecommunications Carriers (except 

Satellite), i.e., an entity employing no 

more than 1,500 persons. There are 

approximately 1,000 licensees in the 

Rural Radiotelephone Service, and the 

Commission estimates that there are 

1,000 or fewer small entity licensees in 

the Rural Radiotelephone Service that 

may be affected by the rules and 

policies proposed herein. 

76. Air-Ground Radiotelephone 

Service. The Commission has not 

adopted a small business size standard 

specific to the Air-Ground 

Radiotelephone Service. We will use 

SBA’s small business size standard 

applicable to Wireless 

Telecommunications Carriers (except 

Satellite), i.e., an entity employing no 

more than 1,500 persons. There are 

approximately 100 licensees in the AirGround Radiotelephone Service, and we 

estimate that almost all of them qualify 

as small under the SBA small business 

size standard and may be affected by 

rules adopted pursuant to the Order. 

77. Aviation and Marine Radio 

Services. Small businesses in the 

aviation and marine radio services use 

a very high frequency (VHF) marine or 

aircraft radio and, as appropriate, an 

emergency position-indicating radio 

beacon (and/or radar) or an emergency 

locator transmitter. The Commission has 

not developed a small business size 

standard specifically applicable to these 

small businesses. For purposes of this 

analysis, the Commission uses the SBA 

small business size standard for the 

category Wireless Telecommunications 

Carriers (except Satellite), which is 

1,500 or fewer employees. Census data 

for 2007, which supersede data 

contained in the 2002 Census, show that 

there were 1,383 firms that operated that 

year. Of those 1,383, 1,368 had fewer 

than 100 employees, and 15 firms had 

more than 100 employees. Most 

applicants for recreational licenses are 

individuals. Approximately 581,000 

ship station licensees and 131,000 

aircraft station licensees operate 

domestically and are not subject to the 

radio carriage requirements of any 

statute or treaty. For purposes of our 

evaluations in this analysis, we estimate 

that there are up to approximately 

712,000 licensees that are small 

businesses (or individuals) under the 

SBA standard. In addition, between 

December 3, 1998 and December 14, 

1998, the Commission held an auction 

of 42 VHF Public Coast licenses in the 

157.1875–157.4500 MHz (ship transmit) 

and 161.775–162.0125 MHz (coast 

transmit) bands. For purposes of the 

auction, the Commission defined a 

‘‘small’’ business as an entity that, 

together with controlling interests and 

affiliates, has average gross revenues for 

the preceding three years not to exceed 

$15 million dollars. In addition, a ‘‘very 

small’’ business is one that, together 

with controlling interests and affiliates, 

has average gross revenues for the 

preceding three years not to exceed $3 

million dollars. There are approximately 

10,672 licensees in the Marine Coast 

Service, and the Commission estimates 

that almost all of them qualify as 

‘‘small’’ businesses under the above 

special small business size standards 

and may be affected by rules adopted 

pursuant to the Order. 

78. Fixed Microwave Services. Fixed 

microwave services include common 

carrier, private operational-fixed, and 

broadcast auxiliary radio services. At 

present, there are approximately 22,015 

common carrier fixed licensees and 

61,670 private operational-fixed 

licensees and broadcast auxiliary radio 

licensees in the microwave services. 

The Commission has not created a size 

standard for a small business 

specifically with respect to fixed 

microwave services. For purposes of 

this analysis, the Commission uses the 

SBA small business size standard for 

Wireless Telecommunications Carriers 

(except Satellite), which is 1,500 or 

fewer employees. The Commission does 

not have data specifying the number of 

these licensees that have more than 

1,500 employees, and thus is unable at 

this time to estimate with greater 

precision the number of fixed 

microwave service licensees that would 

qualify as small business concerns 

under the SBA’s small business size 

standard. Consequently, the 

Commission estimates that there are up 

to 22,015 common carrier fixed 

licensees and up to 61,670 private 

operational-fixed licensees and 

broadcast auxiliary radio licensees in 

the microwave services that may be 

small and may be affected by the rules 

and policies adopted herein. We note, 

however, that the common carrier 

microwave fixed licensee category 

includes some large entities. 

79. Offshore Radiotelephone Service. 

This service operates on several UHF 

television broadcast channels that are 

not used for television broadcasting in 

the coastal areas of states bordering the 

Gulf of Mexico. There are presently 

approximately 55 licensees in this 

service. The Commission is unable to 

estimate at this time the number of 

licensees that would qualify as small 

under the SBA’s small business size 

standard for the category of Wireless 

Telecommunications Carriers (except 

Satellite). Under that SBA small 

business size standard, a business is 

small if it has 1,500 or fewer employees. 

Census data for 2007, which supersede 

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data contained in the 2002 Census, 

show that there were 1,383 firms that 

operated that year. Of those 1,383, 1,368 

had fewer than 100 employees, and 15 

firms had more than 100 employees. 

Thus, under this category and the 

associated small business size standard, 

the majority of firms can be considered 

small. 

80. 39 GHz Service. The Commission 

created a special small business size 

standard for 39 GHz licenses—an entity 

that has average gross revenues of $40 

million or less in the three previous 

calendar years. An additional size 

standard for ‘‘very small business’’ is: an 

entity that, together with affiliates, has 

average gross revenues of not more than 

$15 million for the preceding three 

calendar years. The SBA has approved 

these small business size standards. The 

auction of the 2,173 39 GHz licenses 

began on April 12, 2000 and closed on 

May 8, 2000. The 18 bidders who 

claimed small business status won 849 

licenses. Consequently, the Commission 

estimates that 18 or fewer 39 GHz 

licensees are small entities that may be 

affected by rules adopted pursuant to 

the Order. 

81. Local Multipoint Distribution 

Service. Local Multipoint Distribution 

Service (‘‘LMDS’’) is a fixed broadband 

point-to-multipoint microwave service 

that provides for two-way video 

telecommunications. The auction of the 

986 LMDS licenses began and closed in 

1998. The Commission established a 

small business size standard for LMDS 

licenses as an entity that has average 

gross revenues of less than $40 million 

in the three previous calendar years. An 

additional small business size standard 

for ‘‘very small business’’ was added as 

an entity that, together with its affiliates, 

has average gross revenues of not more 

than $15 million for the preceding three 

calendar years. The SBA has approved 

these small business size standards in 

the context of LMDS auctions. There 

were 93 winning bidders that qualified 

as small entities in the LMDS auctions. 

A total of 93 small and very small 

business bidders won approximately 

277 A Block licenses and 387 B Block 

licenses. In 1999, the Commission reauctioned 161 licenses; there were 32 

small and very small businesses 

winning that won 119 licenses. 

82. 218–219 MHz Service. The first 

auction of 218–219 MHz spectrum 

resulted in 170 entities winning licenses 

for 594 Metropolitan Statistical Area 

(MSA) licenses. Of the 594 licenses, 557 

were won by entities qualifying as a 

small business. For that auction, the 

small business size standard was an 

entity that, together with its affiliates, 

has no more than a $6 million net worth 

and, after federal income taxes 

(excluding any carry over losses), has no 

more than $2 million in annual profits 

each year for the previous two years. In 

the 218–219 MHz Report and Order and 

Memorandum Opinion and Order, we 

established a small business size 

standard for a ‘‘small business’’ as an 

entity that, together with its affiliates 

and persons or entities that hold 

interests in such an entity and their 

affiliates, has average annual gross 

revenues not to exceed $15 million for 

the preceding three years. A ‘‘very small 

business’’ is defined as an entity that, 

together with its affiliates and persons 

or entities, that hold interests in such an 

entity and its affiliates, has average 

annual gross revenues not to exceed $3 

million for the preceding three years. 

These size standards will be used in 

future auctions of 218–219 MHz 

spectrum. 

83. 2.3 GHz Wireless Communications 

Services. This service can be used for 

fixed, mobile, radiolocation, and digital 

audio broadcasting satellite uses. The 

Commission defined ‘‘small business’’ 

for the wireless communications 

services (‘‘WCS’’) auction as an entity 

with average gross revenues of $40 

million for each of the three preceding 

years, and a ‘‘very small business’’ as an 

entity with average gross revenues of 

$15 million for each of the three 

preceding years. The SBA has approved 

these definitions. The Commission 

auctioned geographic area licenses in 

the WCS service. In the auction, which 

was conducted in 1997, there were 

seven bidders that won 31 licenses that 

qualified as very small business entities, 

and one bidder that won one license 

that qualified as a small business entity. 

84. 1670–1675 MHz Band. An auction 

for one license in the 1670–1675 MHz 

band was conducted in 2003. The 

Commission defined a ‘‘small business’’ 

as an entity with attributable average 

annual gross revenues of not more than 

$40 million for the preceding three 

years and thus would be eligible for a 

15 percent discount on its winning bid 

for the 1670–1675 MHz band license. 

Further, the Commission defined a 

‘‘very small business’’ as an entity with 

attributable average annual gross 

revenues of not more than $15 million 

for the preceding three years and thus 

would be eligible to receive a 25 percent 

discount on its winning bid for the 

1670–1675 MHz band license. One 

license was awarded. The winning 

bidder was not a small entity. 

85. 3650–3700 MHz band. In March 

2005, the Commission released a Report 

and Order and Memorandum Opinion 

and Order that provides for nationwide, 

non-exclusive licensing of terrestrial 

operations, utilizing contention-based 

technologies, in the 3650 MHz band 

(i.e., 3650–3700 MHz). As of April 2010, 

more than 1270 licenses have been 

granted and more than 7433 sites have 

been registered. The Commission has 

not developed a definition of small 

entities applicable to 3650–3700 MHz 

band nationwide, non-exclusive 

licensees. However, we estimate that the 

majority of these licensees are Internet 

Access Service Providers (ISPs) and that 

most of those licensees are small 

businesses. 

86. 24 GHz—Incumbent Licensees. 

This analysis may affect incumbent 

licensees who were relocated to the 24 

GHz band from the 18 GHz band, and 

applicants who wish to provide services 

in the 24 GHz band. For this service, the 

Commission uses the SBA small 

business size standard for the category 

‘‘Wireless Telecommunications Carriers 

(except satellite),’’ which is 1,500 or 

fewer employees. To gauge small 

business prevalence for these cable 

services we must, however, use the most 

current census data. Census data for 

2007, which supersede data contained 

in the 2002 Census, show that there 

were 1,383 firms that operated that year. 

Of those 1,383, 1,368 had fewer than 

100 employees, and 15 firms had more 

than 100 employees. Thus under this 

category and the associated small 

business size standard, the majority of 

firms can be considered small. The 

Commission notes that the Census’ use 

of the classifications ‘‘firms’’ does not 

track the number of ‘‘licenses.’’ The 

Commission believes that there are only 

two licensees in the 24 GHz band that 

were relocated from the 18 GHz band, 

Teligent and TRW, Inc. It is our 

understanding that Teligent and its 

related companies have less than 1,500 

employees, though this may change in 

the future. TRW is not a small entity. 

Thus, only one incumbent licensee in 

the 24 GHz band is a small business 

entity. 

87. 24 GHz—Future Licensees. With 

respect to new applicants in the 24 GHz 

band, the size standard for ‘‘small 

business’’ is an entity that, together with 

controlling interests and affiliates, has 

average annual gross revenues for the 

three preceding years not in excess of 

$15 million. ‘‘Very small business’’ in 

the 24 GHz band is an entity that, 

together with controlling interests and 

affiliates, has average gross revenues not 

exceeding $3 million for the preceding 

three years. The SBA has approved 

these small business size standards. 

These size standards will apply to a 

future 24 GHz license auction, if held. 

88. Satellite Telecommunications. 

Since 2007, the SBA has recognized 

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satellite firms within this revised 

category, with a small business size 

standard of $15 million. The most 

current Census Bureau data are from the 

economic census of 2007, and we will 

use those figures to gauge the 

prevalence of small businesses in this 

category. Those size standards are for 

the two census categories of ‘‘Satellite 

Telecommunications’’ and ‘‘Other 

Telecommunications.’’ Under the 

‘‘Satellite Telecommunications’’ 

category, a business is considered small 

if it had $15 million or less in average 

annual receipts. Under the ‘‘Other 

Telecommunications’’ category, a 

business is considered small if it had 

$25 million or less in average annual 

receipts. 

89. The first category of Satellite 

Telecommunications ‘‘comprises 

establishments primarily engaged in 

providing point-to-point 

telecommunications services to other 

establishments in the 

telecommunications and broadcasting 

industries by forwarding and receiving 

communications signals via a system of 

satellites or reselling satellite 

telecommunications.’’ For this category, 

Census Bureau data for 2007 show that 

there were a total of 512 firms that 

operated for the entire year. Of this 

total, 464 firms had annual receipts of 

under $10 million, and 18 firms had 

receipts of $10 million to $24,999,999. 

Consequently, we estimate that the 

majority of Satellite 

Telecommunications firms are small 

entities that might be affected by rules 

adopted pursuant to the Order. 

90. The second category of Other 

Telecommunications ‘‘primarily 

engaged in providing specialized 

telecommunications services, such as 

satellite tracking, communications 

telemetry, and radar station operation. 

This industry also includes 

establishments primarily engaged in 

providing satellite terminal stations and 

associated facilities connected with one 

or more terrestrial systems and capable 

of transmitting telecommunications to, 

and receiving telecommunications from, 

satellite systems. Establishments 

providing Internet services or voice over 

Internet protocol (VoIP) services via 

client-supplied telecommunications 

connections are also included in this 

industry.’’ For this category, Census 

Bureau data for 2007 show that there 

were a total of 2,383 firms that operated 

for the entire year. Of this total, 2,346 

firms had annual receipts of under $25 

million. Consequently, we estimate that 

the majority of Other 

Telecommunications firms are small 

entities that might be affected by our 

action. 

91. Cable and Other Program 

Distribution. Since 2007, these services 

have been defined within the broad 

economic census category of Wired 

Telecommunications Carriers; that 

category is defined as follows: ‘‘This 

industry comprises establishments 

primarily engaged in operating and/or 

providing access to transmission 

facilities and infrastructure that they 

own and/or lease for the transmission of 

voice, data, text, sound, and video using 

wired telecommunications networks. 

Transmission facilities may be based on 

a single technology or a combination of 

technologies.’’ The SBA has developed 

a small business size standard for this 

category, which is: all such firms having 

1,500 or fewer employees. According to 

Census Bureau data for 2007, there were 

a total of 955 firms in this previous 

category that operated for the entire 

year. Of this total, 939 firms had 

employment of 999 or fewer employees, 

and 16 firms had employment of 1000 

employees or more. Thus, under this 

size standard, the majority of firms can 

be considered small and may be affected 

by rules adopted pursuant to the Order. 

92. Cable Companies and Systems. 

The Commission has developed its own 

small business size standards, for the 

purpose of cable rate regulation. Under 

the Commission’s rules, a ‘‘small cable 

company’’ is one serving 400,000 or 

fewer subscribers, nationwide. Industry 

data indicate that, of 1,076 cable 

operators nationwide, all but eleven are 

small under this size standard. In 

addition, under the Commission’s rules, 

a ‘‘small system’’ is a cable system 

serving 15,000 or fewer subscribers. 

Industry data indicate that, of 7,208 

systems nationwide, 6,139 systems have 

fewer than 10,000 subscribers, and an 

additional 379 systems have 10,000– 

19,999 subscribers. Thus, under this 

second size standard, most cable 

systems are small and may be affected 

by rules adopted pursuant to the Order. 

93. Cable System Operators. The Act 

also contains a size standard for small 

cable system operators, which is ‘‘a 

cable operator that, directly or through 

an affiliate, serves in the aggregate less 

than 1 percent of all subscribers in the 

United States and is not affiliated with 

any entity or entities whose gross 

annual revenues in the aggregate exceed 

$250,000,000.’’ The Commission has 

determined that an operator serving 

fewer than 677,000 subscribers shall be 

deemed a small operator, if its annual 

revenues, when combined with the total 

annual revenues of all its affiliates, do 

not exceed $250 million in the 

aggregate. Industry data indicate that, of 

1,076 cable operators nationwide, all 

but ten are small under this size 

standard. We note that the Commission 

neither requests nor collects information 

on whether cable system operators are 

affiliated with entities whose gross 

annual revenues exceed $250 million, 

and therefore we are unable to estimate 

more accurately the number of cable 

system operators that would qualify as 

small under this size standard. 

94. Open Video Services. The open 

video system (‘‘OVS’’) framework was 

established in 1996, and is one of four 

statutorily recognized options for the 

provision of video programming 

services by local exchange carriers. The 

OVS framework provides opportunities 

for the distribution of video 

programming other than through cable 

systems. Because OVS operators provide 

subscription services, OVS falls within 

the SBA small business size standard 

covering cable services, which is 

‘‘Wired Telecommunications Carriers.’’ 

The SBA has developed a small 

business size standard for this category, 

which is: all such firms having 1,500 or 

fewer employees. According to Census 

Bureau data for 2007, there were a total 

of 955 firms in this previous category 

that operated for the entire year. Of this 

total, 939 firms had employment of 999 

or fewer employees, and 16 firms had 

employment of 1000 employees or 

more. Thus, under this second size 

standard, most cable systems are small 

and may be affected by rules adopted 

pursuant to the Order. In addition, we 

note that the Commission has certified 

some OVS operators, with some now 

providing service. Broadband service 

providers (‘‘BSPs’’) are currently the 

only significant holders of OVS 

certifications or local OVS franchises. 

The Commission does not have 

financial or employment information 

regarding the entities authorized to 

provide OVS, some of which may not 

yet be operational. Thus, again, at least 

some of the OVS operators may qualify 

as small entities. 

95. Internet Service Providers. Since 

2007, these services have been defined 

within the broad economic census 

category of Wired Telecommunications 

Carriers; that category is defined as 

follows: ‘‘This industry comprises 

establishments primarily engaged in 

operating and/or providing access to 

transmission facilities and infrastructure 

that they own and/or lease for the 

transmission of voice, data, text, sound, 

and video using wired 

telecommunications networks. 

Transmission facilities may be based on 

a single technology or a combination of 

technologies.’’ The SBA has developed 

a small business size standard for this 

category, which is: all such firms having 

1,500 or fewer employees. According to 

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Federal Register / Vol. 78, No. 8 / Friday, January 11, 2013 / Proposed Rules 2613 

Census Bureau data for 2007, there were 

3,188 firms in this category, total, that 

operated for the entire year. Of this 

total, 3144 firms had employment of 999 

or fewer employees, and 44 firms had 

employment of 1000 employees or 

more. Thus, under this size standard, 

the majority of firms can be considered 

small. In addition, according to Census 

Bureau data for 2007, there were a total 

of 396 firms in the category Internet 

Service Providers (broadband) that 

operated for the entire year. Of this 

total, 394 firms had employment of 999 

or fewer employees, and two firms had 

employment of 1000 employees or 

more. Consequently, we estimate that 

the majority of these firms are small 

entities that may be affected by rules 

adopted pursuant to the Order. 

96. Internet Publishing and 

Broadcasting and Web Search Portals. 

Our action may pertain to 

interconnected VoIP services, which 

could be provided by entities that 

provide other services such as email, 

online gaming, web browsing, video 

conferencing, instant messaging, and 

other, similar IP-enabled services. The 

Commission has not adopted a size 

standard for entities that create or 

provide these types of services or 

applications. However, the Census 

Bureau has identified firms that 

‘‘primarily engaged in (1) publishing 

and/or broadcasting content on the 

Internet exclusively or (2) operating 

Web sites that use a search engine to 

generate and maintain extensive 

databases of Internet addresses and 

content in an easily searchable format 

(and known as Web search portals).’’ 

The SBA has developed a small 

business size standard for this category, 

which is: all such firms having 500 or 

fewer employees. According to Census 

Bureau data for 2007, there were 2,705 

firms in this category that operated for 

the entire year. Of this total, 2,682 firms 

had employment of 499 or fewer 

employees, and 23 firms had 

employment of 500 employees or more. 

Consequently, we estimate that the 

majority of these firms are small entities 

that may be affected by rules adopted 

pursuant to the Order. 

97. Data Processing, Hosting, and 

Related Services. Entities in this 

category ‘‘primarily * * * provid[e] 

infrastructure for hosting or data 

processing services.’’ The SBA has 

developed a small business size 

standard for this category; that size 

standard is $25 million or less in 

average annual receipts. According to 

Census Bureau data for 2007, there were 

8,060 firms in this category that 

operated for the entire year. Of these, 

7,744 had annual receipts of under $ 

$24,999,999. Consequently, we estimate 

that the majority of these firms are small 

entities that may be affected by rules 

adopted pursuant to the Order. 

98. All Other Information Services. 

The Census Bureau defines this industry 

as including ‘‘establishments primarily 

engaged in providing other information 

services (except news syndicates, 

libraries, archives, Internet publishing 

and broadcasting, and Web search 

portals).’’ Our action pertains to 

interconnected VoIP services, which 

could be provided by entities that 

provide other services such as email, 

online gaming, web browsing, video 

conferencing, instant messaging, and 

other, similar IP-enabled services. The 

SBA has developed a small business 

size standard for this category; that size 

standard is $7.0 million or less in 

average annual receipts. According to 

Census Bureau data for 2007, there were 

367 firms in this category that operated 

for the entire year. Of these, 334 had 

annual receipts of under $5.0 million, 

and an additional 11 firms had receipts 

of between $5 million and $9,999,999. 

Consequently, we estimate that the 

majority of these firms are small entities 

that may be affected by our action. 

4. Description of Projected Reporting, 

Recordkeeping, and Other Compliance 

Requirements 

99. The analysis addressed in this 

Initial Regulatory Flexibility Analysis 

will be performed on data collected as 

described in the Report and Order 

section of this document. There are no 

reporting requirements associated with 

the proposals in this Further Notice of 

Proposed Rulemaking. A Final 

Regulatory Flexibility Analysis of that 

data collection is addressed in 

Appendix B. 

5. Steps Taken To Minimize Significant 

Economic Impact on Small Entities, and 

Significant Alternatives Considered 

100. The RFA requires an agency to 

describe any significant alternatives that 

it has considered in reaching its 

approach, which may include the 

following four alternatives, among 

others: (1) The establishment of 

differing compliance or reporting 

requirements or timetables that take into 

account the resources available to small 

entities; (2) the clarification, 

consolidation, or simplification of 

compliance or reporting requirements 

under the rule for small entities; (3) the 

use of performance, rather than design, 

standards; and (4) an exemption from 

coverage of the rule, or any part thereof, 

for small entities. 

101. The proposals in this Further 

Notice of Proposed Rulemaking address 

the analysis of data. It does not address 

the collection of that data. The data 

collection is addressed in the Report 

and Order and the Final Regulatory 

Flexibility Analysis at Appendix B. 

Therefore, there are no reporting 

requirements considered in this Further 

Notice of Proposed Rulemaking and no 

burdens imposed on small entities. 

102. Section IV.B of the Further 

Notice of Proposed Rulemaking seeks 

comment on possible changes to the 

Commission’s pricing flexibility rules 

after it conducts the one-time, multifaceted market analysis discussed in 

Section IV.A of the Further Notice of 

Proposed Rulemaking. Section IV.C 

seeks comment on the reasonableness of 

terms and conditions offered by 

incumbent LECs in the special access 

market. As SBA observed, changes in 

special access prices may have an 

impact on small carriers, including 

small competitive carriers. Once the 

data described in the Report and Order 

is collected and analyzed, we may 

modify the existing pricing flexibility 

rules or adopt a new set of rules that 

will apply to requests for special access 

pricing flexibility, and/or adopt 

remedies when we identify areas where 

market power exists, and determine 

whether a particular term or condition 

is unreasonable in a given area or that 

anticompetitive tying between 

competitive and non-competitive areas 

is occurring. Any such actions will 

accrue to the benefit of all carriers, 

including small competitive carriers, as 

it they will ensure the availability of 

special access services at just and 

reasonable rates. 

6. Federal Rules That May Duplicate, 

Overlap, or Conflict With the Proposed 

Rules 

103. None. 

C. Ex Parte Presentations 

104. The proceeding shall be treated 

as a ‘‘permit-but-disclose’’ proceeding in 

accordance with the Commission’s ex 

parte rules. Persons making ex parte 

presentations must file a copy of any 

written presentation or a memorandum 

summarizing any oral presentation 

within two business days after the 

presentation (unless a different deadline 

applicable to the Sunshine period 

applies). Persons making oral ex parte 

presentations are reminded that 

memoranda summarizing the 

presentation must (1) list all persons 

attending or otherwise participating in 

the meeting at which the ex parte 

presentation was made, and (2) 

summarize all data presented and 

arguments made during the 

presentation. If the presentation 

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2614 Federal Register / Vol. 78, No. 8 / Friday, January 11, 2013 / Proposed Rules 

consisted in whole or in part of the 

presentation of data or arguments 

already reflected in the presenter’s 

written comments, memoranda or other 

filings in the proceeding, the presenter 

may provide citations to such data or 

arguments in his or her prior comments, 

memoranda, or other filings (specifying 

the relevant page and/or paragraph 

numbers where such data or arguments 

can be found) in lieu of summarizing 

them in the memorandum. Documents 

shown or given to Commission staff 

during ex parte meetings are deemed to 

be written ex parte presentations and 

must be filed consistent with 

§ 1.1206(b). In proceedings governed by 

§ 1.49(f) or for which the Commission 

has made available a method of 

electronic filing, written ex parte 

presentations and memoranda 

summarizing oral ex parte 

presentations, and all attachments 

thereto, must be filed through the 

electronic comment filing system 

available for that proceeding, and must 

be filed in their native format (e.g., .doc, 

.xml, .ppt, searchable .pdf). Participants 

in this proceeding should familiarize 

themselves with the Commission’s ex 

parte rules. 

D. Comment Filing Procedures 

105. Pursuant to §§ 1.415 and 1.419 of 

the Commission’s rules, 47 CFR 1.415, 

1.419, interested parties may file 

comments and reply comments on or 

before the dates indicated on the first 

page of this document. Comments may 

be filed using the Commission’s 

Electronic Comment Filing System 

(ECFS). See Electronic Filing of 

Documents in Rulemaking Proceedings, 

63 FR 24121 (1998). 

• Electronic Filers: Comments may be 

filed electronically using the Internet by 

accessing the ECFS: http://apps.fcc.gov/ 

ecfs/. 

• Paper Filers: Parties who choose to 

file by paper must file an original and 

one copy of each filing. If more than one 

docket or rulemaking number appears in 

the caption of this proceeding, filers 

must submit two additional copies for 

each additional docket or rulemaking 

number. 

Filings can be sent by hand or 

messenger delivery, by commercial 

overnight courier, or by first-class or 

overnight U.S. Postal Service mail. All 

filings must be addressed to the 

Commission’s Secretary, Office of the 

Secretary, Federal Communications 

Commission. 

Æ All hand-delivered or messengerdelivered paper filings for the 

Commission’s Secretary must be 

delivered to FCC Headquarters at 445 

12th St. SW., Room TW–A325, 

Washington, DC 20554. The filing hours 

are 8:00 a.m. to 7:00 p.m. All hand 

deliveries must be held together with 

rubber bands or fasteners. Any 

envelopes and boxes must be disposed 

of before entering the building. 

Æ Commercial overnight mail (other 

than U.S. Postal Service Express Mail 

and Priority Mail) must be sent to 9300 

East Hampton Drive, Capitol Heights, 

MD 20743. 

Æ U.S. Postal Service first-class, 

Express, and Priority mail must be 

addressed to 445 12th Street SW., 

Washington, DC 20554. 

106. People with Disabilities: To 

request materials in accessible formats 

for people with disabilities (braille, 

large print, electronic files, audio 

format), send an email to fcc504@fcc.gov 

or call the Consumer & Governmental 

Affairs Bureau at 202–418–0530 (voice), 

202–418–0432 (tty). 

107. For further information, contact 

Jamie Susskind in the Pricing Policy 

Division, Wireline Competition Bureau 

at (202) 418–1520. 

III. Ordering Clauses 

108. It is further ordered that pursuant 

to sections 1, 4(i), 4(j), 5, 201–205, 211, 

215, 218, 219, 303(r), 332, 403, and 503 

of the Communications Act of 1934, as 

amended, 47 U.S.C. 151, 154(i), 154(j), 

155, 201, 202, 203, 204, 205, 211, 215, 

218, 219, 303(r), 332, 403, 503, and 

section 706 of the Telecommunications 

Act of 1996, 47 U.S.C. 1302, this Further 

Notice of Proposed Rulemaking, with all 

attachments, is adopted. 

109. It is further ordered that pursuant 

to applicable procedures set forth in 

§§ 1.415 and 1.419 of the Commission’s 

rules, 47 CFR 1.415, 1.419, interested 

parties may file comments on the 

Further Notice of Proposed Rulemaking 

for sections IV.A and IV.C February 11, 

2013 and for section IV.B on or before 

August 19, 2013, and reply comments 

for Sections IV.A and IV.C on or before 

March 12, 2013 and for section IV.B on 

or before September 30, 2013. 

110. It is further ordered that the 

Commission’s Consumer and 

Governmental Affairs Bureau, Reference 

Information Center, shall send a copy of 

this Further Notice of Proposed 

Rulemaking, including the Final 

Regulatory Flexibility Analysis and 

Initial Regulatory Flexibility Analysis, 

to the Chief Counsel for Advocacy of the 

Small Business Administration. 

List of Subjects in 47 CFR Part 69 

Communications common carriers; 

Reporting and recordkeeping 

requirements; Telephone. 

Federal Communications Commission. 

Marlene H. Dortch, 

Secretary. 

[FR Doc. 2013–00277 Filed 1–10–13; 8:45 am] 

BILLING CODE 6712–01–P 

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